Fundamentals of the Stock Markets to Avoid Incurring Losses

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Stock market is the place for companies to get listed. Based on the company’s core business, balance sheets, and financial report data investor can easily calculate the significant potential of the companies financial growth. Based on the news, and the current trend of the company trader can decide whether to trade or not.

Stock exchanges is place to execute trades. Stock exchange enables buyers and sellers to meet in the virtual online world to work together. These buyers and sellers then decide which security they want to select for trade either they will place buy order or sell order.

Stock Market Categories

Primary market

The primary market is a market where company shares are produced and those shares are available to purchase via company to investor directly. Shares which are produced at first time and available to purchase directly from the company are called as IPO.

Secondary Market

The secondary market is the market where shares are available for investors to trade after issuing an IPO. The secondary market is the market which is preferred by investor to invest. When we talk about the stock market, we usually talks about the secondary market.

Popular terms in the stock market

  • Open – This is the first price at which stock opens when the market starts.
  • High – This is the highest price when the stock price reached at the highest price within the day.
  • Low – This is the lowest price when the stock price reached at the lowest level price within the day.
  • Close – This is the stock price at the time of market close.
  • Volume – volume is the quantity of the shares.
  • Bid price– buying price is called as the bid price
  • Offer– selling price is called offer price.
  • Bid quantity– total number of shares available for buying at a time is called Bid quantity.
  • Offer Quantity– Total number of share available in market for selling is called offer quantity.
  • Buying shares– Buying shares are also called as demand or bid.
  • Selling shares– Selling shares are also called as supply or offer.
  • Share trading: buying and selling shares for the very little span is called as trade in share.
  • Transaction: when buying of shares and selling of shares completes then it is a complete transaction.
  • Square off: square off is the process of buying and selling of shares to complete the transaction cycle.
  • Limit Order: share buyers can place their order at the price which they want, but the order will execute only when given price matches the current market price.
  • Short selling– short selling is the trading type where trader sale assets which he doesn’t have. In short selling trader first, buy shares at the high price then he sells shares when the price comes down. Difference between the trade amount will be marked as profit to trader in this case.

For example, William purchased apple share at 171 dollars then he will wait for the price to come down when share price hits at lower lever say 169 dollars then William will buy that share again. Here William gains 2 Dollar profit for each share which he sold first.

  • Market order: Market order is the price of the stock at which trade gets executed

For example, William is placing the buy order for Apple share at market price then his order will instantly get executed because he is placing his order at market price. Whereas sell order is the order at which trader is selling his holding at the current market price.

  • Stop Loss Order: The most important thing for any investor to keep in mind while making any investments in stock market is the. “STOP LOSS“. It is value which you can put at the time of buying the share or while selling the shares. The stop-loss order will limit investor’s loss. Purchased shares will automatically sold out when share price hits defined stop-loss price.

Conclusion:

Buying the Right at right time, Defining the stop loss and exiting from the hold position at right time will makes you successful in stock market. Most important ADVANTAGE of the stop-loss price is it will limit the your financial losses.

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